>> this is "taking stock" for friday, august 15, 2014. i'm pimm fox. today's theme is connection. ao brothers cofounded company, and they are telling me of going public is in their future. plus, human is the new app looking to cut -- update the contact on your phone. i'll be joined by the chief executive who is rethinking the way we all network. and parents hassan down --

passing down to their children. we warn you of the financial pitfalls of owning a vacation home. let's get the latest headlines from su keenan in the newsroom. >> thanks. the st. louis fed president speaking this afternoon, saying that financial markets are probably mistaken if they are counting on the fed pause to occurrate increases more slowly than policy makers forecast. bullard said that the market is trading to dove visually compared to the committee. ibm says the sales at its news low in the server business cleared a u.s. national security .eview the announcement paves the way for the companies to complete the $2.3 billion transaction. that transaction is under scrutiny because of tensions over cyber intrusion between china and the u.s.

finally, tesla is modifying the warrantee for its model s said and. forill offer battery packs eight years for new and existing customers. elon musk says the warrantee changes will have a moderately .egative effect those are the top headlines. back to you. >> thanks so much. another headline was the ongoing confrontation in ukraine. the government and kiev says troops destroyed part of a convoy of military vehicles that russia.the border from russia denies this. meanwhile, the european union warns it could expand sanctions against russia. the executive vice president at joins me.ic council he previously worked at the national atlantic secret he council where he advised the white house on ukraine. what exactly is rush upon endgame? russia's

>> they want to manipulate and maintain some lever of control over all of ukraine. at the end of the day, we are focused on this humanitarian situation, but the reality is they're actually would not be a conflict in eastern ukraine if it went off for russian strategy. i think his in game is influencing control over the future and shape of ukraine's destiny. >> let's talk about tactics. is it to destabilize the ukraine military? >> what we seeing outplaying -- what we see playing out right now, there's a lot of attention to this strange humanitarian convoy the russians say they are trying to send into the ukrainian territory. part of what may be playing out as an effort to halt what had been dramatic advances by the ukrainian armed forces over the past few days, who had really been pummeling separatists. by sending this convoy, russians may be hoping to negotiate a cease-fire to allow rebels to

maybe regroup and help resupply them. on the more nefarious side, this may be a russian tactic to provoke ukrainians, to strike russian-identified targets, giving them even more of a pretense to intervene in ukraine. it is hard to know exactly what is in putin's mind, but he is playing a dangerous game. >> what about public opinion inside russia and support for president putin? is this all playing into the pr war? >> i think that's exactly right. one of the most important fronts of this war is the information war. we have seen how the russians have constructed almost a completely alternative narrative about what is playing out in ukraine. russia is coming to save ukraine 's speakers in russia's east. what we are of seeing now with this humanitarian convoy really plays

into the pr at home with russian citizens showing russian citizens that couldn't really cares about the -- that putin really cares about the russian .peakers in eastern ukraine it very much reinforces this alternative narrative he has created over the conflict. >> you keep mentioning eastern ukraine. just a foregone conclusion that russia will be controlling crimea? >> russia is in control of crimea, no doubt. part of the trap we are playing senses by creating this of instability and the aggression in the east that the international community risks almost moving beyond crimea. i think that is a next road and -- anly important point extraordinarily important point, that crimea will and should remain part of ukraine. point maybe putin's

to be able to back away a little bit from the conflict and therefore almost get away with the annexation of crimea, but i am confident most western leaders are going to keep crimea on the agenda. our policies and sanctions will continue to target companies that operate in crimea, but this is clearly going to be a long game now. >> i want to thank you very much. keep us informed. let's turn to the conflict between israel and hamas. they have agreed to five more days of truce to allow further talks. the sides have been speaking through egyptian mediators. while talks continue, though, israel's defense industry continues to accelerate, including drone manufacturers. >> israeli troops spent three weeks on the ground in gaza, but most of the damage and death in this conflict came from the air in the form of rockets by hamas

militants and airstrikes from the israeli military. the targeting and intelligence required for the strikes often came from unmanned aerial vehicles. >> these drones can also see ballistics and things like that. >> they can see everything. they can see from 3000 feet, a soldier, a rifle, a vehicle. of ais is the ceo 700-person private technology firm that focuses almost exclusively on drones. >> we are selling more uav's than anybody else in this country. >> the to mr. rohn market is less than 10% -- the domestic drone market is less than 10%. >> this local market, unfortunately, battlefield. combat provenre in israel, you have a stamp of quality, and it's easy to convince international customers

that this is a proven solution. >> 200 million dollars in annual revenues comes from customers on five continents. thanks to firms like this, israel has overtaken the u.s. in and as the world's sixth largest arms exporter overall. >> i tell my students that israel used to be known for exporting oranges. now it is known for exporting military technology. served in the country's army at one point or another, which means the entire israeli economy benefits from a massive workforce of ex-military personnel. >> a lot of know-how and skills come from people serving in the israeli defense forces. that has been an excellent school for many workers. >> the closely between the military and defense companies here have been crucial to growing these businesses. >> how often is it in

conversations with israeli military that these ideas come up? basis.y daily basis. we are talking to them every day . you know, it is a small community. >> while aeronautics may have indirectly profited from israel's conflicts, the company says it would rather see its technology used for peaceful civilian purposes. entire you look at the israeli defense industry, it is significant both in israel and in terms of global exports. >> yes, pimm. the country here, the government here does not break down economic data by defense sector, but some of the independent commissions being put together by universities here in recent years have found -- and this is quite astounding -- that about a quarter of the country's industrial output comes from the defense sector, and about 1/5 of all the people employed in the

industrial sector work for that defense sector. fact,around 9/11, in 2001, defense exports tripled to more than $7 billion, which makes them the fastest-growing defense exporter in the world. >> how heavily involved in the defense industry is the government? >> you have to remember, a lot of the largest weapons technology companies here are in fact majority-owned by the government. we talk in washington when we discuss this sort of thing about the revolving door policy between people using the u.s. military and going to work for u.s. defense contractors. in israel, it's more of an open door policy. there is a constant flow of idea between the two sectors. i went tohe company visit just south of here, just south of tel aviv -- a few days ago, they kept me waiting about half an hour because they were

in a very long meeting, the executive i was going to interview, with some very senior israeli military officials. >> i was going to ask about the security you had to go through in order to get into the company. let's talk about the drones specifically you mentioned in that piece. israel, the world's largest exporter of those drones. how did this all happened? >> you have to look at the history. i know you are a keen student of israeli history. about 40 years ago is when they started to develop this technology. they have very difficult borders with countries like jordan, egypt, the gaza strip now. the military needs to monitor those areas, in particular, and if you look back the last 20, 25 years, a lot of soviet scientists were moving to israel and bringing a lot of expertise. that was invested in the r&d sector here. thelly, something government realized after -- they arms embargoes were going to have to develop, and drones has been a big part

of that. >> today, our theme is connections, and air pooler connects pilots with passengers, has deemedthe faa the service is legal. coming up, i will speak with the company's chief executive and get his reaction. this is "taking stock" on bloomberg. ♪

" onhis is "taking stock bloomberg. i'm pimm fox. the u.s. federal aviation administration said airpooler, which connects pilots with passengers who are willing to split travel expenses, says it is not operating legally. the scribe exactly what the faa said and what airpooler does. >> thank you for having me. airpooler is an online platform light planes who

have extra seats can list their plights, and people who want to go to the same places can arrange to fly with them in exchange for sharing the costs -- they can list their flights. you are driven by recreational pilots, private pilots. the cost to operate these types of planes is $100 or $200 an hour versus thousands over traditional private aviation. people get affordable access to general aviation for a miniscule fraction of what it has traditionally been, and the big deal for the pilots is that this helps them save some of the a growing lee expensive thing to do, to fly around, so they can get back to doing what they love to do -- helps them shave some of the costs off a growingly expensive thing to do. >> why does the faa say this should not be allowed? >> the faa has traditionally said that the money that pilots when passengers chip in

for gas is not compensation, and that is a critical issue. private pilots cannot get compensation. takingu are compensation, you need a much more stringent license. in effect, you are an air carrier, subject to a whole other set of regulations, similar to an airline. we went to the faa and said, "can you clarify and confirm this is the case?" we wanted to have people using the system -- give them peace of mind, especially the pilots. the faa came back very surprisingly with a very confusing answer and said that the money pilots get -- cost-sharing is compensation. to do that, they used language for a newft proposal regulation in the year 1963, and when the regulation, which became the authoritative, definitive statement was passed in 1964, the agency entirely

reversed itself. ever since then, sharing money has not been considered compensation. this is a new development that i think has left everyone in the industry quite confused. it means hundreds of thousands of passengers, quite literally, to collect money from their brother-in-law or friends because they are in a seat in the airplane have to file a 1099 with the irs because they received compensation for doing something. >> what do you think is behind the ruling? >> we can only surmise. traditionally, the faa has had a double mission -- to promote public safety and encourage the general aviation industry. we think what they have done here really is tilted all the way out of an overabundance of caution toward the safety issue, and it really is stifling innovation in the general aviation industry. the average hours that a small plane is flown reached its

at 400e lowest point hours. it's like having a vacation home you use for less than a week a year. it's killing aviation. if they are going to tend to both sides of the mission, we think the use of new technology is something that should be encouraged. >> what is next? what is next for airpooler? hasince the faa's letter left people confused, i think the natural thing to do is go back with them and ask them to .larify what did they really mean? we are very interested in having that dialogue with them. >> we've got to leave it there. i want you to keep us updated. steve lewis is the chief executive officer and cofounder of airpooler. you can get more details on this story by going to bloomberg.com, plus our story on uber, which is

a recent banefying in the city of berlin. coming up, cannot remember the name of a business colleague? the solution to this problem might be humin. you will meet its chief executive next. ♪

>> this is "taking stock" on bloomberg. i'm pimm fox. your face is familiar, but cannot recall the name? there's a technology solution that combines all your contacts from linkedin and facebook to your phone and calendar and puts them all in one place. the idea is to provide context

for your contacts. richard branson, the creator of angry birds, entertainer will.i. am, all part of the private beta launch a few months ago. now everyone can get in on it. i'm joined by the chief executive. thanks so much for being here. what is humin? what problem are you trying to solve? >> one, and terrible with names. i have a problem with walking down the street and not only see and remember almost everything last week,- we met we were friends, we dated -- somehow the name escapes me. that's actually not uncommon. we set out to solve the problem by making the phone part of your phone smart. >> how did you do this? how did you take the idea of me meeting you, not remembering your name -- how do i look you up? >> today, your phone app is a

giant off of medical list of everybody you have ever met. when you open your phone, it thinks the most important person in your life is aaron. mom is half way down the list. we wondered what if we could remember people the way you naturally do, integrate with your calendar and contacts and phone locations, to find out when i meet you, remember that moment here and now, so later, i open up the phone and tell it that i need to call the guy i met last night. or if i land in new york, can it search my contacts automatically to find my contacts who live in new york because they become contextually relevant the minute i land. >> you have to have gps turned on to make it work? >> you can turn it on and off. it will integrate with your calendar directly, look at the clock and time when you meet people, so think of the phone .pp you open it. your new phone.

you make calls, your voicemails, everything just like you are used to it, except instead of a giant off of medical list, you just search the way you as a user remember people. i-n, humin. how do you make money? >> by solving this crazy problem, we can become the on alllayer -- lair these devices. you can actually use it the way you would normally use your own. imagine on your car or any other connected devices, we can put , and it willontext navigate to the person you are meeting next. >> that means you will not forget anybody's name ever again. >> frankly, having an actual organization to your life. one of our biggest goals today

is people can put technology in the background of their life, and they will not have to worry about sitting and fiddling through lists. cofounder.humin next, blackberry. this is "taking stock" on bloomberg. ♪

>> this is "taking stock" on bloomberg. i'm pimm fox. at today'slook market moving headlines, let's go to su keenan in the newsroom. >> thanks, pimm. adjusted earnings at este lauder more than doubled in the fourth quarter led by demand for luxury cosmetics.

for the year, the company says it achieved a record net sales and $97 billion net. at the same time, estee lauder forecast trailing analyst estimates. finally, royal bank of scotland says it will higher more than two people in the next tw -- to three years. >> thanks very much. blackberry's smartphone shipments grew 15% in the second quarter, marking the first sequential game this year. the chief executive's turnaround plan seems to be taking hold. ise to discuss blackberry garrett from toronto. tell us about lack berry and

this increase. >> you are right -- they had a 15% increase in the second quarter, meaning they shipped about 200,000 more phones than they did in the first quarter, which sounds like good news, but we have to look at it in the context of compared to last year, which is 78% fewer phones -- almost 5 million fewer phones they shipped this quarter than the same time last year. chen came in john december, giving more confidence .o investors you could look at it and say that it looks like people are at least not getting rid of them or at least not ignoring those contracts as much as they might have been throughout the past year, but it is still just one quarter, and we have to see how they kind of keep moving forward. >> to we have detailed information on the models of phones that are selling well -- do we have detailed information? >> the information we reported

on yesterday came from the idc, which is an independent research firm. they do not necessarily come from blackberry itself. in terms of the models that are selling, i should point out that john chen, when he came in, brought back the blackberry bold , the phone that first debuted in 2008. very popular, and it was gotten rid of in exchange for more touchscreen kind of phones. a lot of clients did not like that adjustment, so john chen brought that back -- >> this is the phone that has the keyboard? >> exactly. it's the phone with the keyboard. >> do we know where this is being sold -- the u.s. or overseas? where is the biggest increase coming from? >> these are global shipment. the blackberry is still quite popular in some emerging markets, particularly indonesia. one of the things john chen did was bring in lower and models, so cheaper for those consumers

in emerging models, and it's in indonesia.ll >> blackberry has about .5% of the global smartphone market. is this aligning with john chen 's strategy at the company? >> his strategy has been to focus more on the business services side, not necessarily selling a bunch of handsets, which might have been what they have done in the past, but moving into selling secure communications systems and that kind of thing to large companies and government departments. .5%, obviously, is a very small portion of the market. it's nothing compared to what they had in their heyday. john chen is not necessarily planning to start increasing that or selling a whole bunch of smart phones -- smartphones, but the fact that the decrease has slowed is good news for them. >> i want to thank you for joining me. bloomberg's reporter in toronto covering blackberry. coming up, blackstone group cutting back on fast food. the firm wants to unload the

franchisee running the midwest burger king operation. details ahead. also, i will introduce you to the cofounders of a food delivery service looking to get you bagels from new york, barbecue from texas, and they will deliver it right to your door, next on "taking stock of ♪ -- on "taking stock p co. ♪

>> this is "taking stock" on bloomberg. i'm pimm fox. time to talk food. blackstone group, the private equity company, saying it may be shopping around the company that -- i'mmes of the whopper talking about burger king restaurants. what is going on with blackstone and burger king? >> blackstone has owned this burger king franchisee for almost eight years now. it is an illinois-based franchisee, manages about 330 burger king locations.

holding it for eight years, blackstone investors are asking where their money is. .t is time to sell this company >> any prospective buyers? >> none that we have heard of so far. blackstone has just started the process. since thery trends recession of not been great. people have been spending less and looking for healthier food options. is in that market, at least marketing itself as healthier. that said, burger king has learned some lessons. you may have heard or read that earlier this week, they ies,ontinued their satis-fr an attempt at a healthier option of fries that consumers just were not buying. they at least took action to discontinue that, and they were

spending a lot on marketing, so burger king is definitely trying to turn around the lackluster trends. >> any indication how burger king is doing under new management? >> i have sales figures here in front of me. down each year since 2009, so .ot great those are lower revenues, of course, and they are spending a lot on marketing, so it has been tough. blackstone may be trying to get out before things get worse. >> to we have details about how much blackstone actually paid for this business eight years ? o -- do we have any details >> they bought about 2/3 of the locations for about $150 million. we have heard that this sale will almost definitely be below $1 billion.

deal, butt be a huge they are trying to do it quickly. >> any word on who might be the natural buyer? carol restaurants based in very large burger king franchisee. .> there are several options we may see another private equity bidder come into the scene, but we have not heard anything from our sources just yet. >> i want to thank you very much. selling of burgers and french fries to ordering gourmet perhapsine, are you looking for a maine lobster roll or maybe arches in a bread from a california bakery? foody direct will deliver it to your door.

you have a background in the food business. why would you want to get into this kind of delivery service? >> i was running the number one fulfillment partner on seamless here in new york, and i got the call from brad about three years ago with this idea to basically dowhat seamless and grubhub basically on a national scale. >> but he did not have any background in the restaurant industry. your background was in the banking industry. >> that's right. you grew up -- we grew up on long island. i worked at goldman sachs for 21 years. we spent a lot of time researching these great restaurants and always enjoyed these great restaurants. . live now near palo alto we have everything -- great restaurants, great food, fresh laundry, but we do not have that great new york smoked salmon. i was here in new york walking

down 7th avenue and went into one of the most famous and agels places and b in new york and had just a wonderful meal and the enjoyment and satisfaction of the experience literally brought tears to my eyes. i went back to california and started doing some research into whether some other iconic legendary establishments around the country ship their food. it turns out they do, but they have very challenged websites and expensive shipping, so we had the idea to build a marketplace where food lovers could go and discover, browse, order from the top restaurants, bakeries, and specialty country. in the >> what kind of foods are on the site? >> we have a great selection. her stuff, the food has to be ship-worthy, of course. that is a given. but in addition, we have

regional specialties like some of the best crab cakes maryland. buffalo's best chicken wings, memphis barbecue, texas brisket -- things that are very hard to get unless you are in that part of the country. >> how do people get on your platform? >> they have to meet certain criteria. they have to, first off, have a very passionate and deep local following. they have to have great press and media and accolades and and things reviews like that on user-driven sites, but they also have to be good and demonstrate an ability to ship in the most professional and reliable way that will ensure that the customer orerience 1000 miles away 3000 miles away is just as good as it is in their restaurant. >> i would say that brad has to try all the potential restaurants. >> i do. it's a very tough job. >> you must be really, terribly

taxed every day. >> brutal. actually, we go out and visit these places. we meet the owners and make sure they are committed to 100% quality, one hundred percent customer satisfaction. it has been very useful because we have established great relationships with these purveyors. >> you can order the food from maine, massachusetts, texas, florida, so on -- what's the next step? >> right now, we have 63 merchants on the site. probably 75 by year-end. because of the simplicity and efficiency of our software, it is simple and effective for on our site.come over the last several months, we have enabled several merchants .hat have never shipped before the redhook lobster, which was named by "the daily meal" is the

best food truck in america. these are places that have been started by great entrepreneurs and our technology and backend solution is enabling them to ship their product to their craving following. >> you got some competition, though. grubhub.oned they do things local, but you can also go online and find gourmet options. >> i think this really validates the space. the market for gourmet food in the nation is in the billions, so i think that validates it. clearly, we are focused on building a very consumer driven site that has a great experience in terms of ordering perishable food. you are able to schedule your delivery date, for example. if you are sending someone a

gift, you do not have to send it the day you happen to be in the shopping cart. you can ship it a month out on your parents' anniversary or your son's graduation. >> for have to turn to you as the former banker. >> i think i had my fill of -- philip ipo -- my fill ipo's in the late 1990's. >> is there one food purveyor you have been hankering for you are trying to go after that you wish would come on or you wish there was a way to get the food to you? >> we have our eye on a couple of really special places that we are confident we will be bringing on over the next few months for sure. >> that's the banker's way of saying, "i'm not going to tell you are co-what is your way?

.> i would say at the same way there's one or two that we have not really penetrated as much as we would like to. i'm thinking ice cream. what do you think? >> we have some of the best ice cream in the country. two of our partners were just named, i believe, in the top 10 in america. a place in north carolina ships the most incredible ice cream sandwiches. places like this now have access to optimized shipping rates through foodydirect, and we can bring this food to everyone across north america. >> thanks very much, foodydirect cofounders. well done. everyone is hungry now. coming up, have you ever considered buying a vacation home? we will tell you why that may not be the best idea. and coming up on "bloomberg west," alibaba has been buying

stakes in more than a dozen companies, but now there are accountingbout practices at one of those companies. we will raise some of those red flags. find out more tonight -- "bloomberg west," six clock and 11:00 p.m. eastern. ♪

>> this is "taking stock" on bloomberg. i'm pimm fox. late news coming this hour -- bally and pharmaceutical says it has extended its offer to purchase allergen until the end nt the year -- valea pharmaceutical says it has extended its offer to purchase allergan until the end of the year. allergan has repeatedly rejected the offer and has sued valeant,

claiming the drugmaker colluded with the fund to profit from insider trades ahead of the offer. let's turn our attention to vacation homes. buying a vacation home seems glamorous, but it can be more stressful than buyers believe. imagine inheriting a $750,000 paying it can leave you $40,000 a year just to keep the place up. here to tell us more about the pitfalls of owning a second home planner rickl taylor, who has been ranked one of the top 15 most experienced planners by "businessweek." vacation homes -- these are the dreams people have. when they go on holiday, they come back and say, "we must own a home." financialarily a good decision. >> it's not a good investment. expensive to maintain, expensive to pay these taxes and fees on

rentals, and people say they will make their money back by renting it out, and they do not realize a real estate agent can make 40% of that take. >> stress and aggravation. you have done a little work investigating the cost of having a second home. does that cost out way the dream of getting away and having your own spot in the sun? >> typically it does. you can actually have your cake and eat it, too. your money and simply rent a home, and the cost is usually much, much lower. >> then why do people choose to buy second homes? it must be with their heart instead of their head. >> bragging rights. you can have friends and family come stay there. you get to be the person that invites those people. that people have blinders on when they are on

vacation, especially this time of year. they are on vacation. they are in this beautiful spot, and they think that they could live there, and they go around to local real estate agents and get the ideas in their head. >> also, the weather. you do not necessarily foretell that the weather will change as you own the home and that the house will not be the dream that you thought in the summer -- it is not going to happen in the winter. >> winters are tough on these homes. saltwater is tough on these homes. i talked to one planner whose client found out he would have to replace the windows every six years, and that was just wiping out all the event till income for that entire summer -- all the rental income for that entire summer. >> if people decide they want to have a second home, should they just swallow and realize it's going to be very expensive? >> there are several ways to do it. in the first place, buying a second home can make a lot of

sense if you are going to spend a lot of time there. 3, 5, 6 months out of the year. maybe that second home is ok, but people have to be really sure that that is the area they want to leave, the city -- the area they want to live, the city they want to the end, the neighborhood they want to be in for a long time because of course, you have locked yourself into that area. a lot of this is done in .motionally 90% of all financial decisions are made emotionally. it is really taking a hard look andhe dollars and cents asking if this really makes sense. >> is it possible that many people who have a vacation home -- the money is not the issue. they want a place to go to because it changes the venue and lets them hang out with family and friends. >> a lot of people have the money to burn. why not spend it?

you just cannot think of it as an investment. >> i want to thank you very much. thanks for "taking stock p or "up -- "taking stock. ♪

captioning made possible by bloomberg television] >> live from pier 3 in san francisco, west to "bloomberg west" where we cover innovation, technology and future of business. i'm emily chang. ahead on "bloomberg west" this hour, commerce giant ail by baba is facing new questions about whether it's done enough due diligence on its recent acquisition spree, this after possible accounting flus turned up at one of its purchases, alibaba pictures. the recent disclosure means the upcoming i.p.o. could face additional scrutiny from u.s. regulators, though not likely to delay the i.p.o. the i.p.o. road show may start september 3.